Jaydan Pty Ltd v You Move Me Group Pty Ltd

The Plaintiff and Mr Eliyahu

1. The "Current and Historical Company Extract" from ASIC, searched on 15 November 2023 ('the ASIC search'), discloses that the plaintiff was registered as Didi Family Pty Ltd on 17 June 2015. On 25 October 2016, the name of the plaintiff was changed to Jaydan Pty Ltd. On 16 April 2020, an Application for the Voluntary Deregistration of a Company was filed and processed, so that the plaintiff was deregistered on 16 April 2020.
2. On 29 April 2022, on the application of Mr Eliyahu, a Senior Deputy Registrar of the Supreme Court of New South Wales ordered the reinstatement by ASIC of the registration of the plaintiff. The plaintiff was re-registered on 11 May 2022.
3. Under s 601AH(5) of the Corporations Act 2001 (Cth), if a company is reinstated, it is taken to have continued in existence as if it had not been deregistered.
4. In its statement of claim, the plaintiff pleads that Mr Eliyahu was, at all material times, the sole director and shareholder of the plaintiff and "the controlling mind and alter ego" of the plaintiff. It is further pleaded in the statement of claim that: 10. At the time that the Consultancy Agreement was entered into, the Plaintiff was in a position of special disadvantage in relation to the First Defendant by reason of the fact that Mr Eliyahu was suffering from episodes of psychosis and mania which made him unable to discharge his proper functions as a director of the Plaintiff. 11. Further and in the alternative, at the time that each of the Payments was made by the Plaintiff to the First Defendant, the Plaintiff was in a position of special disadvantage in relation to the First Defendant by reason of the fact that Mr Eliyahu was suffering from episodes of psychosis and mania which made him unable to discharge his proper functions as a director of the Plaintiff. 12. The First Defendant was aware of the special disadvantage under which the Plaintiff was labouring (or, in the alternative, was aware of facts and circumstances which would have caused a reasonable person in the circumstances to be aware of the special disadvantage under with the Plaintiff was labouring). …
5. The ASIC search records Mr Eliyahu's address as 2005 A38 Victoria Drive, Chatswood NSW [sic]. In his affidavit of 6 February 2024, Mr Levy, the solicitor for the defendants, said that he had conducted a Google Maps search for that address, and the result was that no such address is recorded on Google Maps. In his affidavit of 19 February 2024, Mr Levy said that he had searched the underlying document to the ASIC search, which disclosed that Mr Eliyahu's address had been stated on the document as 2005 438 Victoria Avenue Chatswood NSW 2067.
6. Mr Eliyahu swore the affidavit verifying the statement of claim on 9 December 2022. In that affidavit, he gave his address as the address of the plaintiff's solicitors and his occupation as "Company Director".
7. Mr Eliyahu was born in Israel and grew up in Israel. Most of his family live in Israel. He has no family in Australia.
8. On 3 January 2023, in the context of the defendants' solicitor's request for security for costs in the sum of $70,000, the plaintiff's solicitors sent an email to the firm then acting for the defendants which said, in part: We are instructed by our client to agree to give security for costs progressively in tranches during the course of the proceedings. Until a defence is filed is not possible to give a meaningful estimate of what legal costs will be incurred in the proceedings. Security for costs for the filing of the defence will be provided in the first instance and the issue of providing further security for costs will be revisited once the defence has been filed.
9. By email on 1 June 2023, in response to a query from the defendants' solicitors in relation to non-compliance on the part of the plaintiff with the timetable of 1 March 2023, the solicitor for the plaintiff advised that Mr Eliyahu was "currently in a rehabilitation clinic undergoing treatment". In a further email of 9 June 2023, the plaintiff's solicitors said that Mr Eliyahu was still in the rehabilitation clinic undergoing treatment.
10. By email dated 4 August 2023, in reply to an email from the defendants' solicitor expressing concern about delay and an assurance about further security for costs, the plaintiff's solicitor noted that Mr Eliyahu was facing criminal prosecution on the state of Nevada, USA, and that those proceedings would not be finalised for a further three to six months. In addition, the plaintiff's solicitor said that Mr Eliyahu remained in a "live-in rehabilitation treatment clinic" "where he has been since January 2023".
11. In his affidavit of 15 August 2023, Mr Sarmiento, solicitor, said that he believed the State of Nevada commenced criminal proceedings against Mr Eliyahu on 9 November 2022, and that Mr Eliyahu had engaged Nevada Defense Group, in Nevada, to represent him in those proceedings. Mr Sarmiento had made an enquiry of that firm and had been told that the proceedings were not likely to conclude for a further three to six months.
12. Mr Sarmiento said that the live-in, rehabilitation treatment program commenced by Mr Eliyahu on 10 January 2023 was at Kfar Izun in Israel. Mr Eliyahu was discharged from that facility on 10 August 2023. Mr Sarmiento said that Mr Eliyahu had been resident at the facility "on a full-time basis", and "he has only been able to go home for the weekends". I infer that Mr Eliyahu has a home in Israel.
13. Mr Sarmiento annexed to his affidavit of 15 August a very brief report dated 17 April 2023 from Dr Schreiber, Psychiatrist, which discloses that Dr Schreiber was Mr Eliyahu's supervising psychiatrist at the live-in facility in Israel. Dr Schreiber says, in his report, of Mr Eliyahu: He is a 35 year-old male, married with no children. He currently lives in Israel and currently does not work.
14. Dr Schreiber says, in his report, that Mr Eliyahu has been diagnosed with Bipolar 1 Affective Disorder. He records that from 2016 to 2022, Mr Eliyahu had three discrete manic episodes with psychotic features, each of which included "an involuntary commitment to psychiatric hospitalization and treatment in a in-patient setting". He further records that Mr Eliyahu had two consecutive major depressive episodes after the first two manic episodes. Mr Eliyahu had been an extensive cannabinoid user "until recently". A further diagnosis of "Mental and behavioural disorders due to cannabinoids use" was recorded in the report.
15. Mr Sarmiento swore a further affidavit dated 18 October 2023. He provided a further report dated 13 October 2023, concerning Mr Eliyahu, from Dr Anthony Naftali, Psychiatrist, of the Mount Carmel Psychotherapy Institute. In his report, Dr Naftali said that he had examined Mr Eliyahu twice and further said, among other things: Today Idan lives with his mother Zippi and his father… Idan is unmarried - he has a regular girl friend who at the present time is living in America. Idan completed 12 classes in school and served in the Israeli army for 3 years and following his army service went to live in Australia where he was hospitalized in psychiatric institutions at least twice when he moved to America he was also hospitalized on 2 occasions. His last psychiatric hospitalization was in Israel in the TIRP hospital from 17.8.23 till 10.9.23 in an acute psychotic state. According to the discharge letter he was admitted in an aggressive paranoid state and was totally disoriented. … …he indicated that although he is receiving vast amounts of medication he is suffering from chronic insomnia, he is unable to concentrate on even the simplest tasks that his mother gives him to do around the house. I also detected elements of paranoia in my examination. Due to his present mental state (Bipolar Affective Disorder, Drug abuse (Cannabis) And acute psychosis, and due to the fact that he is taking large doses of tranquillizing and anti-psychotic medication it is my considered opinion that he is unable to return to Australia to appear in court to give evidence coherently and prepare any form of judicial statement. I also recommend that he enter a strict psychiatric rehabilitation regime for at least 6 months or even for a year at the end of which I hope he will be able to appear in court to present his case coherently.
16. Mr Lozina, solicitor, swore an affidavit on 20 November 2023, saying that Mr Eliyahu had instructed him that he was proposing to enter in-patient psychiatric treatment in Israel from 5 November 2023 for six to twelve months. Mr Eliyahu told Mr Lozina that he would not be allowed to use his mobile phone or his laptop whilst he was an in-patient. Mr Lozina said that Mr Eliyahu told him that Lana Lorina, who, Mr Lozina said, is Mr Eliyahu's partner, would monitor Mr Eliyahu's emails. Mr Lozina said that Ms Lorina confirmed to him on 20 November 2023 that Mr Eliyahu had been admitted to the clinic called Ilanot in Israel.
17. Mr Lozina swore an affidavit on 19 February 2024, which said, in part: 2. I am informed by the first cross-defendant (Mr Eliyahu) and verily believe: a. that he had left "Ilanot", the live-in rehabilitation facility referred to in paragraph 2 of my First Affidavit [dated 15 December 2023] on 4 December 2023. At the time that I swore my First Affidavit, I was not aware that he had left the facility; b. Mr Eliyahu left "Ilanot" because it was "too tough" for him with "tight schedules" and "lots of discipline" and that he continues to take medication for his mental condition which is continuing; and c. Mr Eliyahu continues to attend the Mahale Hakrmel Psychiatric Hospital in Israel for monthly consultations being the hospital that he was involuntarily admitted into from 17 August 2023 to 10 September 2023.
18. Mr Lozina swore a further affidavit on 29 February 2024 which said, in part: 2. I am informed by the first cross-defendant (Mr Eliyahu) and verily believe that Mr Eliyahu on the morning of Tuesday 20 February 2024 climbed a section of the Sydney Harbour Bridge with a view to committing suicide. I am further informed by Mr Eliyahu and verily believe that police attended and persuaded Mr Eliyahu to come down from the Bridge and since that time has been detained in the mental health unit of St Vincent's Hospital.
19. An email dated 5 March 2024 from Mr Eliyahu to Dr Hannon of Northside Consulting was annexed to Mr Lozina's affidavit of 4 April 2024. Mr Eliyahu's email says, in part: In September 2021 I moved to US with Lana and I had two admissions in to hospital due to psychosis, first one in October 2022 and second in November 2022 then I flew to Israel and had one more admission in Israel in December 2022 all of them for about 10 days. The next admission I had was in August 2023 in Israel for 3 and a half weeks due to psychosis. I arrived in Australia 3 weeks ago and I was very depressed few days after arrival I climbed the harbour bridge wanting to commit suicide what led to 10 day's admission to St Vincent's.
20. Mr Lozina swore an affidavit dated 18 April 2024 in which he said, in part: 2. After not being able to make contact with Mr Eliyahu since Friday 5 April 2024, I had a conversation with Mr Eliyahu on Thursday 17 April 2024 in which Mr Eliyahu advised me and I verily believe that he was in hospital recovering from major stomach surgery to remove screws and other object which he swallowed with a view to taking his own life. 3. I asked him how long he had been in hospital for and his response was that he didn't know, but it might have been something like three of four weeks. I also asked him if he knew when he would be released, and he told me that he wasn't sure, but that he understood that it could be as early as Friday (which I understood to mean 19 April 2024) but that it would depend on when he sufficiently recovered.
21. A report from Dr Berry, psychiatrist, dated 30 April 2024, was obtained by the plaintiff's solicitors in relation to Mr Eliyahu. Dr Berry's report was annexed to Mr Lozina's affidavit of 6 May 2024. Dr Berry was provided with a report of Dr Schreiber of 17 April 2023, a repot of Dr Naftali dated 13 October 2023 and a report of Dr Hannon of 22 March 2024. Dr Berry saw Mr Eliyahu on one occasion, via video conference, when Mr Eliyahu was an in-patient at St Vincent's Hospital having had the foreign objects he had swallowed surgically removed from his abdomen.
22. Dr Berry said, in his report, that Mr Eliyahu came to Australia from Israel about two months prior to their consultation. Mr Eliyahu gave Dr Berry an account of the incident in which he climbed the Sydney Harbour Bridge and an account of the incident in which he swallowed nails and screws in a suicide attempt. Dr Berry said: He does not feel that he can focus on legal matters currently. His memory is poor and he struggles to recall details and organise the things that need to be done to proceed with his claim. He cannot read basic emails. … He remails linked in with Dr Hannon. He is not engaged in any psychological therapy. His treatment options following his discharge from hospital are unclear given he does not have secure accommodation and has little in the way of familial supports in Australia.
23. Dr Berry said, in his report, that Mr Eliyahu told him the following: Mr Eliyahu reports his first episode of mania in 2016. He was admitted to the mental health unit of St Vincent's hospital. He recalls being irritable and fighting with those around him. He was spending excessively and had grandiose ideas. He thought he was going to change the world. He remained in hospital for around a week and then returned to Israel. His diagnosis of bipolar affective disorder type one was confirmed in 2017 by his psychiatrist in Israel. He has had around 10 hospital admissions since 2017 in Australia, the United States and Israel. Most admissions were precipitated by a manic episode. During a manic episode he becomes irritable and grandiose. He has lots of energy and sleeps poorly. He has made some very poor decisions during such episodes. He has been arrested, spent large sums of money (up to $40,000) and accumulated debt - on one occasion he bought every brand of phone on one trip to an electronics store; shut down a business he had been running for years; flew overseas impulsively; drove recklessly; stayed in hotel suites with different women. Manic episodes can last for a number of months. They are often precipitated by stress. His family monitors for signs and tries to remove his credit cards if they notice early warning signs of mania. He typically goes through a depressive episode following a manic episode. His depressive episodes often do not respond well to treatment and typically take 6-12 months to resolve.
24. Dr Berry diagnosed Mr Eliyahu with bipolar affective disorder type one and noted that he was currently experiencing a major depressive episode. Dr Berry said, in his report: Mr Eliyahu is currently experiencing a major depressive episode. His symptoms are severe and have included two attempts to end his life and two hospital admissions. On initial admission to hospital, he appears to have been experiencing psychotic symptoms, which have now resolved. He is receiving treatment, but faces an uncertain immediate future. He has no secure accommodation in Australia and is reliant on his Synagogue for support. Most family supports are in Israel. He is likely to need continuing treatment from a psychiatrist and increased support from his family in order for his depressive episode to improve. If he follows his usual recovery pathway, symptoms are likely to be slow to resolve, possibly within 12 months.
25. Dr Berry further said, in his report: Prognosis is guarded. Mr Eliyahu's condition is a lifelong condition and will not resolve. He will remain at increased risk of both manic and depressive episodes which can hopefully be managed with treatment. His current depressive episode is likely to improve and resolve with appropriate treatment. This is likely to take between six and 12 months if it follows a similar recovery pathway to previous depressive episodes. This is not unusual for depressive episodes of bipolar affective disorder, which often respond poorly to treatment. … Mr Eliyahu's cognitions are currently impaired. His concentration is poor and his mood is very low. He is unlikely to be able to engage meaningfully in any legal process or fully understand the issues involved with such a process. His communication skills are significantly reduced (he is barely talking to family) and he is cognitively slowed. He has little supports and no secure accommodation. In my view, he does not currently have capacity to provide instructions to conduct litigation. He would need sustained improvement in symptoms for this to change. This is likely to take between 6-12 months. … I think he is likely to regain full capacity but he will need to see a sustained improvement in symptoms. This will likely take between six and 12 months. Attempts to engage in legal matters prior to a significant improvement in his current symptoms are likely to exacerbate his symptoms.
26. The report by Dr Hannon which was given to Dr Berry was dated 22 March 2023 (but should have been 22 March 2024). Dr Hannon said that he had last reviewed Mr Eliyahu on 19 March 2024. Dr Hannon said: I have been consulting to Mr Eliyahu's care since 2018. He has been diagnosed with a chronic relapsing mood disorder since then. He experiences manic episodes with psychotic features and depressive episodes. He has had several suicide attempts and requires lifelong medication to reduce episode frequency. …He has had numerous lengthy psychiatric admissions in Sydney under my care, at other facilities in Sydney, and at facilities in Israel.
27. Dr Hannon said that Mr Eliyahu, as at 19 March 2024, was experiencing an episode of depression as a relapse of his bipolar disorder. Dr Hannon said that previous episodes have taken 6 to 12 months to improve. Dr Hannon said: Mr Eliyahu has a sustained cognitive impairment since February 2024 that will impact his ability to understand his legal issues, reason on that information and communicate his desires and instructions. This capacity is likely to improve towards the end of this year if his depressive episode responds to the new treatment, however it is probable that the sustained impairment will improve to an intermittent impairment only. I would not expect a consistent improvement in his cognitive ability and legal capacity until 2025. Mr Eliyahu is alone in Sydney and can rely on a friend or family member for supported decision-making during this episode of depression. I would recommend that he abstain from involvement in any business and legal matters until his episode is in remission. Involvement in these matters is likely to worsen or delay his condition and his ability to make decisions will be impaired.
28. Mr Eliyahu swore an affidavit on 8 May 2024. In the affidavit, Mr Eliyahu said that he "is currently in Israel and living with my parents in the town of Beit Shean recovering from my mental condition and major surgery. Once I recover, I intend to return to Australia on a permanent basis to reside." Mr Eliyahu said that he planned to start a business in the sale and marketing of cosmetic products "being the same business I was involved in from about 2010 to about 2021, firstly as an employee/contractor and then as a business owner." He said that he intended to "return to live in Australia permanently to pursue the business opportunity which I refer to above."
29. Mr Lozina swore an affidavit on 27 June 2024. Mr Lozina said that Tsipora Eliyahu, Mr Eliyahu's mother, had been appointed a director of the plaintiff, and that Mrs Eliyahu has been authorised to instruct StevensVuaran Lawyers in the proceedings.
30. Mr Lozina further said, in his affidavit: Mr Eliyahu is currently in hospital in Israel, recovering from recent attempts to take his own life and at this stage a tutor has not been appointed to act on his behalf in his capacity as a cross-defendant in the proceedings. Although Mr Eliyahu's evidence will be central to the plaintiff's case in the proceedings, Mr Eliyahu is not himself a plaintiff in the proceedings - his only personal role is as a cross-defendant.
31. Mr Levy, the solicitor for the defendants, provided an ASIC search as at 15 November 2023 in relation to the plaintiff as an annexure to his affidavit of 20 November 2023 (see [13] above). The ASIC search showed that Mr Eliyahu was, at that time, the sole director and secretary of the plaintiff, and the plaintiff had issued 120 shares and had paid up capital of $120. The address of the plaintiff was the address of the solicitors for the plaintiff, StevensVuaran. A further search on 31 January 2024, annexed to Mr Levy's affidavit of 6 February 2024 showed no change with respect to these matters. Mr Eliyahu's address, in both searches, was the Chatswood address. It is probable, however, on the material before me, that Mr Eliyahu has not resided at that address since he moved to the USA in September 2021.

The defendants' application

1. The defendants seek an order that the plaintiff, within 28 days, pay into Court the sum of $73,000 as security for the defendants' costs. A stay of the proceedings is sought until the security is provided. An order that the plaintiff's statement of claim be dismissed in the event that security is not provided within 28 days is also sought.
2. In an email dated 3 January 2023, the plaintiff's solicitors said, among other things: We are instructed by our client to agree to give security for costs progressively in tranches during the course of the proceedings.
3. On 16 January 2023, the plaintiff's solicitors said, in an email, that the plaintiff would pay $4,000 into court as security for costs. An order granting liberty to apply for further security for costs was foreshadowed in the email. Judicial Registrar Howard made orders for the payment of $4,000 into court and gave the foreshadowed liberty to apply on 11 February 2023.
4. The plaintiff was deregistered in 2020, at which time it was not carrying on business and it had assets worth less than $1,000. The plaintiff was re-registered following an application by Mr Eliyahu to the Supreme Court of New South Wales.
5. In his affidavit of 20 November 2023, Mr Levy gives a detailed estimate of the defendants' costs and disbursements of these proceedings assuming that the matter proceeds to judgment after a two day trial, on the basis of the sum likely to be recovered upon assessment on a party/party basis. Mr Levy's estimate is a total of $73,363.95 including GST. I accept Mr Levy's estimate.
6. Mr Lozina, in his affidavit of 15 December 2023, provided an estimate of the plaintiff's costs and disbursements of the proceedings in the event that the matter proceeds to judgment after a two day trial. Mr Lozina's estimate was $63,940 plus GST, which is $70,334. I also accept Mr Lozina's estimate. I note that the estimate of the costs and disbursements of each side are very close to each other.

The principles applicable to the application for security for costs

1. The Corporations Act 2001 (Cth) provides, in s 1335(1): Costs (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. (1A) Subsection (1) does not apply to a corporation that is an Aboriginal and Torres Strait Islander corporation. Note: Similar provision is made in relation to Aboriginal and Torres Strait Islander corporations under section 581 - 20 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006. (2) The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.
2. The Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') provide, in rule 42.21: 42.21 Security for costs (cf SCR Part 53, rules 2, 3, 4 and 5; DCR Part 40, rule 1; LCR Part 31, rule 11A, Part 31A, rule 11) (1) If, in any proceedings, it appears to the court on the application of a defendant - (a) that a plaintiff is ordinarily resident outside Australia, or (b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or (c) that, after the commencement of the proceedings, a plaintiff has changed his or her address, and there is reason to believe that the change was made by the plaintiff with a view to avoiding the consequences of the proceedings, or (d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, or (f) that there is reason to believe that the plaintiff has divested assets with the intention of avoiding the consequences of the proceedings, the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant - (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) whether the plaintiff is effectively in the position of a defendant, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff. (1B) If the plaintiff is a natural person, an order for security for costs cannot be made merely on account of his or her impecuniosity. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed. (4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given.
3. The purpose of an order for security for costs is to ensure that, where a plaintiff does not succeed in its suit, the defendant is not financially disadvantaged despite having prevailed.
4. There is a reluctance to make orders for security for costs against an impecunious natural person (see Ward v Westpac Banking Corporation Ltd [2023] NSWCA 11). In this matter, however, the order is sought against the plaintiff, which is a proprietary limited company.
5. There is a wide discretion to make an order for the provision of security for costs. The power must be exercised judicially. In Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [47] (Idoport), Einstein J said: "[47] It is clear that the discretion to award security for costs requires to take into account all of the relevant facts matters and circumstances and is a judicial discretion to be exercised following the adducing of all evidence by each party to an application seeking to have such an award made. As Giles J (as His Honour then was) made plain in Rosenfield Nominees Pty Ltd v Bain and Co (1988) 14 ACLR 467 at 470, in exercising the discretion as to whether or not to make an order for costs, the Court must have a concern to achieve a balance between ensuring that adequate and fair protection is provided to the defendant, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings [cf Street CJ in Buckley v Bennell (1974) 1 ACLR 301 at 304]. Giles J referred to the debate over whether the discretion should be exercised with some predisposition in favour of the defendant and expressed the view with which I agree, that the debate is largely semantic. The principle which his Honour identified at 470 was that: "the discretion must be exercised having regard to all the circumstances of the case, but the inability of the plaintiff to meet the costs of the successful defendant, being the occasion for invoking the exercise of the discretion, is likely to play an important if not decisive role"."
6. Where a defendant has led cogent evidence to establish that the plaintiff would be unable to pay the costs of the defendants, upon the disposal of the proceedings, if ordered to do so, "an evidentiary onus falls upon the plaintiffs to satisfy the Court that taking into account all relevant factors, the Court's discretion ought to be exercised by either refusing to order security or by ordering security in some lesser amount than was sought by the defendants" (Idoport at [62]. See also Treloar Constructions Pty Ltd v McMillan [2016] NSWCA 302 at [15]).

Is there reason to believe that Jaydan Pty Ltd will not be able to pay the defendants' costs if ordered to do so (r 42.21(1)(d) and r 42.21(1A)(c))

1. The defendants argued that the issue of security for costs should be considered with regard being paid to the fact that the plaintiff has a paid-up share capital of $120, was voluntarily de-registered on 22 April 2020, was re-registered on 13 May 2022, seven months before the proceedings were commenced, no longer holds a trading name or a registered business name and does not appear to carry on business of any kind.
2. The defendants also relied upon the previous agreement on behalf of the plaintiff to pay security for costs in tranches, beginning with the $4,000 which has already been ordered by the Judicial Registrar. The defendants argued that the agreement by the plaintiff to pay costs in tranches was evidence of a tacit acknowledgement that the plaintiff will be unable to meet an adverse costs order.
3. The defendants argued that the matters set out in the affidavit evidence provided show that the plaintiff is unlikely to be able to meet an adverse costs order.
4. The defendants pointed out that the plaintiff had not provided any evidence that it had assets or carried on business or had any other means of satisfying an adverse costs order.
5. The plaintiff did not attempt to show that it had assets or access to a source of funding to which it could resort in the event that an order is made against it for the defendants' costs. It did not attempt to address its evidential onus in any way.
6. I find, on the evidence before me, that the plaintiff would presently not be able to meet a costs order in this matter from its own resources.
7. The plaintiff argued that the existence of the cross-claim meant that the risk to the defendants of the non-payment of a costs order in their favour was somehow ameliorated. I do not consider that the cross-claim has any impact upon the existence of the risk to the defendants of having the plaintiff fail to satisfy a costs order in their favour.

Is the plaintiff's impecuniosity attributable to the defendants (r 42.21(1A)(d))

1. The defendants submitted that there is no basis for thinking that the plaintiff's impecuniosity is in any way attributable to the defendants' actions. The plaintiff has not produced any evidence of that kind. The plaintiff did not argue that the plaintiff's impecuniosity was attributable to the defendants.

Would an order for security for costs stifle the proceedings (r 42.21(1A)(f))

1. The defendants submitted that there is no evidence to support the argument that an order for security would stultify the ability of the plaintiff to pursue its claim. No direct evidence has been provided to establish that Mr Eliyahu and Mrs Eliyahu lack the ability to support the claim financially.
2. The plaintiff argued that an order for security for costs may stifle the proceedings. However, no evidence was adduced as to the financial resources which may be available to the plaintiff from Mr Eliyahu, Mrs Eliyahu or any other person or entity.
3. In Odyssey Financial Management Pty Ltd v QBE Insurance (Australia) Ltd [2012] NSWCA 113, McColl JA said that, if a plaintiff wished to demonstrate that an order for security for costs would be oppressive (at [17]): "it would be necessary for those who stand behind [the plaintiff] to demonstrate that they are also without the means to provide an order for security in the relatively modest amount [the defendant] seeks." No such demonstration has been attempted in the plaintiff's case.

The prospects of success or merits of the proceedings (r 42.21(1A)(a))

1. The defendants submitted that, in this case, given that no evidence relating to the allegation in the statement of claim of a breach of contract had been provided by the plaintiff, it would be appropriate to adopt the approach taken by Ward CJ in Eq in Galati v Deans [2018] NSWSC 1600 at [68]-[70]: "[68] First, as to the prospects of success and genuineness of the proceedings (r 42.21(1A)(a)-(b); and see KP Cable Investments Pty Ltd v Meltglow Pty Ltd (at [197]) and Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 (at 514)), it has been said that, as a general rule, where a claim is prima facie regular on its face and discloses a cause of action then, in the absence of evidence to the contrary, the Court should proceed on the basis that the claim is bona fide and has reasonable prospects of success (KP Cable Investments Pty Ltd v Meltglow Pty Ltd at [197]). [69] In the present case there is no submission to the effect that the proceedings are not genuine and both parties accept as a matter of law that the prospects of success or merits of the cross-claim may properly be taken into consideration. As noted above, this is a factor on which FDC placed some weight. EJC, on the other hand, submits that in the present case it is a neutral factor, in circumstances where there is an evidentiary vacuum and where, on one view of the facts to which the cross-claimants point, there may be a totally innocent explanation. [70] I do not consider that I am in a position, based on the pleadings or the material to which I was taken on this application, to form a sufficient view as to the prospects of success of the cross-claim against EJC to warrant a conclusion that this is a factor that points against the grant of security. I accept the submission made for EJC that it is a neutral factor."
2. Mr Eliyahu, having voluntarily sought and obtained the deregistration of the plaintiff on 16 April 2020, then made an application to the Supreme Court nearly two years later to have the plaintiff's registration reinstated. This application was granted on 29 April 2022, and the plaintiff was re-registered on 11 May 2022. The plaintiff argued that it could be inferred from the circumstances that Mr Eliyahu applied to have the plaintiff's registration reinstated for the purposes of commencing the proceedings, and that this was an indication of the importance Mr Eliyahu placed on the proceedings. Such an inference overlooks the initial voluntary deregistration of the plaintiff more than three years after the period of time addressed in the statement of claim. The plaintiff's argument should not be accorded any weight in the assessment of the prospects of success of the proceedings. The importance that Mr Eliyahu attaches to the proceedings at any given time is no indication of their merit as a matter of fact or law.
3. Given the absence of any evidence before me concerning the prospect of success of the plaintiff's claim, I accept the defendants' submission that it is neutral in the balancing exercise of determining whether to make an order for security for costs.

Whether there has been any admission or payment into court (r 42.21(1A)(h))

1. As set out above, an order was made by the Judicial Registrar on 11 February 2023, with the consent of the plaintiff, for the payment into court of $4,000 on account of costs up to the preparing and filing of a defence. The plaintiff also, in the letter of 3 January 2023 from its solicitors to the defendants' solicitors, "agreed to give security for costs progressively in tranches in the course of the proceedings". I infer that the plaintiff no longer intends to provide further security for costs voluntarily.

Other issues

1. In its submissions, the plaintiff laid stress on the condition of Mr Eliyahu and pointed out that, in addition to being a director of the plaintiff, he was also likely to be the principal, if not the only, witness for the plaintiff. The plaintiff argued that the better course would be to grant its application to stay the proceedings until further order. The plaintiff relied upon the report of Dr Berry of 30 April 2024, in which Dr Berry said that Mr Eliyahu suffers from a lifelong condition, namely bipolar affective disorder type 1, and that his current depressive episode may resolve within 6 to 12 months (see [33] to [37] above).
2. The defendants referred to the fact that, in Dr Naftali's report of 13 October 2023, Dr Naftali expressed the hope that Mr Eliyahu would be fit to participate in legal proceedings after "a strict psychiatric rehabilitation regime for at least 6 months or even a year". The defendants pointed out that more than eight months of the period referred to by Dr Naftali had passed without any apparent sustained improvement in Mr Eliyahu's condition or symptoms. The period of time to which the statement of claim relates is now more than seven years in the past. These proceedings were commenced eighteen months ago, and no evidence has yet been served in support of the claim. The hearing of the notices of motion has been beset by delay mostly attributable to the symptoms of Mr Eliyahu's condition. Since Dr Berry's report, there has been a further incident of self-harm. On the evidence, the resolution of Mr Eliyahu's symptoms is not progressing to date.
3. I bear in mind that the proceedings have been brought by the plaintiff, which is a proprietary limited company. The submissions on behalf of the plaintiff tended, at times to elide the identity of the plaintiff with Mr Eliyahu. They are separate entities as a matter of law. If Mr Eliyahu were the plaintiff, a different balancing exercise would be called for.

The plaintiff's application

1. By notice of motion filed on 15 August 2024, the plaintiff seeks to have this matter placed in the "not ready" list pending further orders, with liberty to restore the matter on 5 days' notice.
2. The plaintiff argued, in effect, that the further progress of the matter should await the recovery of Mr Eliyahu, both because he is the "controlling mind" of the plaintiff, and because he would be the principal or only witness in the matter. The material set out above at [24]-[42] and the submissions summarised above at [71] were relied upon.
3. The second defendant provided evidence that he had been informed by a mortgage broker that, when seeking a loan to finance a property purchase, he would be required to disclose the fact that he was a defendant to proceedings. He was also advised that the fact of his being a party to the proceedings would adversely affect the amount of money he would be allowed to borrow because the cost of the proceedings and the risk of an adverse judgment would affect his capacity to service a loan. The mortgage broker further advised that the second defendant's credit risk generally would be affected by the existence of the proceedings (see Mr Levy's affidavit of 6 February 2024).
4. The plaintiff argued that, if the proceedings were not stayed, and an order for security for costs was made, the prejudice to the plaintiff would be that the security for costs order would not be able to be satisfied and the proceedings may be dismissed. The plaintiff says that the time within which the proceedings could be initiated expired in December 2022. The plaintiff argued, in effect, that the prejudice to the second defendant of refusing to stay the proceedings indefinitely ought to be weighed against the prejudice to the plaintiff of refusing the stay and ordering the payment of security for costs.

The cross-defendant/plaintiff's application for security for costs

1. The parties agree that the application has been rendered unnecessary on account of Dr Goldbarsht's undertaking.

Consideration and decision on the applications

1. The defendants have established, on the basis of cogent evidence, that there is a real likelihood that the plaintiff will not be able to satisfy an order for costs in the defendants' favour upon the disposal of the proceedings.
2. The plaintiff has adduced no evidence concerning its own financial resources or the funds to which it may have access from those who stand behind it. The plaintiff has failed to address the evidential onus to rebut the defendants' prima facie entitlement to an order for security for costs.
3. It has not been established that an order for security for costs would stifle the proceedings. No information has been provided about the funds to which the plaintiff may have access.
4. No evidence has been adduced in support of the allegations in the statement of claim. In the balancing process required to do justice to the parties in the process of determining whether to make an order for security for costs, I will treat the prospect of success of the claim as neutral.
5. The claim relates to a period of time which is now more than seven years ago. The delay is largely attributable to the plaintiff.
6. The prejudice to the defendants in the event that they succeed in defending the claim and an order for costs which cannot be satisfied by the plaintiff is apparent and has considerable weight in the balancing exercise.
7. The prejudice to the plaintiff in the event that it does not have access to the means to give security for costs by the payment in of the sum sought also has considerable weight in the balancing exercise.
8. The outcome of the balancing exercise is that the defendants have established an entitlement to an order for security for costs.
9. The plaintiff seeks an order that the matter be stayed indefinitely, with liberty to apply on 5 days' notice.
10. On the evidence presently before me, there is no firm prediction as to when Mr Eliyahu is likely to be fit to participate in these proceedings. Two predictions of a six to twelve month period for the improvement of symptoms have been made, one on 13 October 2023, and one on 30 April 2024. It appears that both predictions have been overtaken by events. I note that Mr Eliyahu is presently unfit to participate in the proceedings and has been unfit since some time prior to 13 October 2023. I further note that no tutor has been appointed for Mr Eliyahu in circumstances where he is a cross-defendant to the first defendant's cross-claim.
11. The defendants would be subject to considerable prejudice in the event that the proceedings were stayed indefinitely. I accept that being subject to a claim for damages affects their credit rating and their ability to borrow money.
12. The plaintiff argued that, if the proceedings were stayed, the defendants would not incur any further costs. I do not accept that submission. The staying of the proceedings inherently includes the prospect of the expenditure of further costs in the event that there is an application to re-enliven the claim. Costs will be incurred in meeting that application and, potentially, in opposing the claim. The prospect of succeeding in defending the claim, but not receiving costs in compliance with a costs order, will again arise for the defendants. In summary, the grant of an indefinite stay would only defer the issue of security for costs.
13. The plaintiff did not suggest any lesser figure for costs than the estimate given by Mr Levy.
14. The following orders will issue: 1. Within 28 days of the date of this order, the plaintiff is to provide security for the defendants' costs pursuant to rule 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') and section 1335(1) of the Corporations Act 2001 (Cth) by paying into Court the sum of $73,000. 2. The proceedings are stayed in accordance with rule 42.21 UCPR and s 67 of the Civil Procedure Act 2005 (NSW) until the plaintiff provides security in accordance with order (1). 3. In the event that security for costs in accordance with order (1) is not provided within 28 days, the statement of claim will be dismissed. 4. The defendants have liberty to apply for additional security for costs at any stage of these proceedings. 5. The application filed on 15 December 2023 by the plaintiff/cross-defendant for security for costs from the first defendant/cross-claimant is dismissed. 6. The application filed on 15 August 2023 by the plaintiff for the placement of the matter in the "not ready list" pending further orders is refused.

Amendments 11 July 2024 - Amendment to the hearing dates - 28 May changed to 28 June 2024. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 July 2024